The Donnie Co. and the Thea Co. manufacture fairly similar remote-controlled toy cars. The Tristan Co. a retailer of children's toys, expects to buy and sell 4,000 of these cars each year. Both Donnie and Thea can supply all of Tristan's needs, and Tristan prefers to use only on supplier for these cars. An electronic hookup will make ordering costs negligible for either supplier. Tristan wants 80 cars delivered 50 times each year. Tristan obtains the following additional information.   Donnie Thea purchase price of the car. $50 $ 49 relevant incremental carrying cost of insurance, materials handling breakage, etc. per car per year. $11 $10 Expected number of stockouts per year resulting from late 20 cars 50 cars deliveries. Stockout costs per car $25 $26 Expected number of cars sold that will be returned owing to quality and other problems 40 cars 140 cars Additional to Tristan of handling each returned car $21 $21 Inspection costs per delivery $20 $28   Required: which supplier should Tristan choose? Show calculations. What other factors should Tristan consider before choosing a supplier?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Exercise 2

The Donnie Co. and the Thea Co. manufacture fairly similar remote-controlled toy cars. The Tristan Co. a retailer of children's toys, expects to buy and sell 4,000 of these cars each year. Both Donnie and Thea can supply all of Tristan's needs, and Tristan prefers to use only on supplier for these cars. An electronic hookup will make ordering costs negligible for either supplier. Tristan wants 80 cars delivered 50 times each year. Tristan obtains the following additional information.

 

Donnie Thea

purchase price of the car. $50 $ 49

relevant incremental carrying cost of insurance,

materials handling breakage, etc. per car per year. $11 $10

Expected number of stockouts per year resulting from late 20 cars 50 cars

deliveries.

Stockout costs per car $25 $26

Expected number of cars sold that will be returned

owing to quality and other problems 40 cars 140 cars

Additional to Tristan of handling each returned car $21 $21

Inspection costs per delivery $20 $28

 

Required:

  1. which supplier should Tristan choose? Show calculations.
  2. What other factors should Tristan consider before choosing a supplier?
Expert Solution
steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Capital Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education